There are 3 dominant players in the Jamaica Blue Mountain coffee industry
each controlling approximately 30% of market share. They are:
Mavis Bank Coffee Factory - A private business owned by the Munn family
Wallenford Coffee factory - owned by the government
Blue Mountain Coffee Coop - owned by the farmers
Jamaica Blue Mountain annual green bean production is between 4 and 6 million
pounds
We will use an average of 5 million pounds per year for calculating a
hypothetical scenario.
These production numbers are stable barring any natural disasters like
hurricanes which would limit the supply but also drive the price up.
The CFPC relationship with Blue Mountain Coffee Co-operative (BMCC) announced
January 19, 2007 gives them 30% of the annual production or roughly 1 and a half
million pounds per year. If they wholesale this volume of production at the
green bean stage, making an average of $7.00 pound, it would mean $10.5 million
to the bottom line. Assuming 30 million shares out this is 30 cents per share
earnings under the present signed and contractual arrangements with BMCC.
If they would roast 50% and wholesale the balance as green bean, making $7 and
$14 per pound, their gross margin would balloon to $15.75 million or 52 cents
per share earnings.
The PE in the industry is 30 to 40 times earnings.
Interesting to note there are changes occurring in Jamaica with the government
owned coffee factory. If CFPC were to bring that under their umbrella of
operations as well, that would mean they could earn between 60 cents and $1.04
per share, just with the Jamaica market.